Brokerages remain pessimistic over another EcoPro rally

EcoPro BM's manufacturing facility in Ochang, North Chungcheong Province / Yonhap

By Lee Min-hyung

Brokerage houses are breaking their silence concerning the volatile EcoPro share, releasing pessimistic reports as to the possibility of additional rallies for the battery material producer. This sentiment is due to its “excessive” market capitalization compared to that of global battery cell manufacturers here.

Most securities firms have so far remained reluctant to share a target stock price for EcoPro and its key affiliate EcoPro BM, as their stock prices continue a surprisingly robust rally for the past few weeks by shattering a once-prevalent overvaluation outlook.

However, with a large number of such battery stocks exhibiting an end to their respective bullish runs with recent price adjustments, brokerage houses have started issuing underwhelming reports about further growth of red-hot secondary battery stocks.

Eugene Investment & Securities set EcoPro BM's target stock price at 200,000 won ($153) per share, almost half of the current price, citing the lingering overvaluation risk.

“A combined market capitalization of EcoPro and EcoPro BM reached almost 70 trillion won, which exceeds the combined value of EcoPro's two clients ― Samsung SDI and SK Innovation ― which come in at 63 trillion won,” Han Byung-hwa, an analyst at the securities firm, said. He also claimed it was irrational that the market cap of cathode battery materials makers tops that of battery cell manufacturers, adding that this is evidence that EcoPro shares are overvalued.

Other brokerage houses are also slashing the target stock price of EcoPro BM. Samsung Securities revised down the figure to 330,000 won per share. Most other securities firms also expect that EcoPro shares will experience a downward adjustment period soon.

Hana Securities recently issued a report, urging investors to sell EcoPro shares by setting its target stock value at 555,000 won per share, half of its current price now.

“More competitors are forecast to emerge in the lithium battery market from diverse industries, including automobiles, batteries and IT. So market rivalry will get tougher,” Kim Hyun-soo, an analyst at the brokerage house, said.

“Given the toughened market outlook, the current price level is not attractive enough for investors,” he said.

Regardless of the current rosy outlook of EcoPro's inclusion in the MSCI Korea Index this month, the firm's stock price is still highly overvalued, so the firm's valuation is vulnerable to even the smallest bit of negative news, according to the analyst.